Interested In RM's (LON:RM.) Upcoming UK£0.03 Dividend? You Have Three Days Left

RM plc (LON:RM.) stock is about to trade ex-dividend in 3 days. If you purchase the stock on or after the 18th of March, you won't be eligible to receive this dividend, when it is paid on the 30th of April.

RM's upcoming dividend is UK£0.03 a share, following on from the last 12 months, when the company distributed a total of UK£0.06 per share to shareholders. Based on the last year's worth of payments, RM stock has a trailing yield of around 2.6% on the current share price of £2.3. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for RM

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately RM's payout ratio is modest, at just 29% of profit.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by RM's 11% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. RM has seen its dividend decline 2.3% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid RM? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. We think this is a pretty attractive combination, and would be interested in investigating RM more closely.

So while RM looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - RM has 2 warning signs we think you should be aware of.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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